The .config file for the media service isn't retained between versions. This should probably be noted in the upgrade instructions, or setting it could be incorporated in the service's setup (similar to requesting the user account).

Our install in not part of an upgrade but is a new install and we are also experiencing the same error as reported by an earlier poster. Does anyone have addtional suggestions on how I might troubleshoot this?

Update: 11/18/09 Well, the service Media Encoder service started successfully after updating the registry
with the disableloopbackcheck entry Reference Technote 896861http://support.microsoft.com/kb/896861 and restarting the server afterward.
Maybe the restart resolved the issue -nevertheless wanted to provide and update on this. Thanks!